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Worrying debt dynamics

The Canadian dollar was higher Thursday morning amid seesawing expectations of this weekend's summit of European leaders.

The loonie rose 0.46 of a cent to 98.48 cents US after losing just over half a US cent on Wednesday.

Investors hope that a summit meeting of eurozone leaders this weekend will produce a three-pronged solution to the debt crisis. That would include measures to boost the firepower of the bailout fund, a recapitalization of a large part of the banking sector and a plan to get the banks to take a bigger hit on their Greek debt holdings.

But financial markets have been intensely volatile as investors weigh every rumour and report about the likely make-up of a deal that may emerge at the Sunday meeting.

Meanwhile, Greece's international creditors warn that a second rescue package tentatively agreed in July may not be enough to save the country from bankruptcy. But a draft of a report from the European Commission and the European Central Bank obtained by The Associated Press said Athens should nevertheless get its next batch of bailout loans.

The inspectors said Greece's debt dynamics remain "extremely worrying."

The conclusions from the two institutions pile pressure on European leaders at a key summit this Sunday to make private creditors like banks take more losses on the Greek bonds they hold.

Commodities have also seen huge swings because failure to tackle the debt crisis could result in a disorderly default by Greece, play havoc with the region's banks and derail an already fragile economic recovery, which in turn would slash demand for oil and metals.

Thursday was no different with the November crude contract on the New York Mercantile Exchange up 11 cents to US$86.22 a barrel after losing over $2 on Wednesday.

Demand worries pushed copper prices lower for a fourth day with the December contract on the Nymex down 12 cents to US$3.14 a pound.

Bullion prices also backed off for a fourth session. The December gold contract in New York fell $29.50 to US$1,617.50 an ounce.



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